Overall, Indiana has a very competitive business tax climate. That is thanks to the 2002 elimination of the inventory tax (like most other states had already done) and additional measures.

Concerns, however, remain. They include:

• Many states do not have a personal property tax on machinery and equipment. Indiana does. These taxes hinder innovation; an alternative is to tax the income and sales that are produced
• Indiana’s corporate income tax rate of 8.5% is ninth highest in the country, a disincentive for new or expanding businesses
• The classification system that would emerge if proposed differential property tax caps are approved

The cap argument was at center stage throughout the 2008 General Assembly, and it will return in 2009. Homeowner property tax relief was critical, but it should not come at the expense of future business development. If business property is subject to different tax treatment in the constitution, spending interests will return seeking more. The 3% business property tax cap (even higher in 2009) would be the third highest rate in the country.

The constitutional guarantee of uniform and equal assessments and taxation was a wise one. Instead of unequal caps, let’s enhance spending controls, enact the efficiencies laid out by the Kernan-Shepard Commission and improve the tax climate for all.

The latest Letters to Our Leaders installment offers the details. Read the letter (and others in the series); watch the one-minute video below; offer your comments.

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